The Devil's in the Performance-Based Details

The process to reauthorize the Higher Education Act is in full swing, and both the White House and Congress appear to have admirable goals. Everyone agrees that students and parents should have more information about the institutions they are considering, that college needs to be more affordable, and that degree completion has real value in the marketplace. There's little to argue about thus far. The devil, however, is in the details.

Underlying those stated goals is the public perception that college is unaffordable for America's middle class. Annual tuition hikes often exceed inflation by two and even three times. At the same time, salaries of some college presidents appear to be out of line, at least with the public's view of what the job entails. And information about things such as completion and default rates are hard to obtain. So, what gives?

Every college president bridles at the criticisms. We explain that our institutions rely on talented faculty, and that we must meet a growing number of student expectations, like additional health-support staff and academic advisers. We are pressed to depend less on part-time faculty. We operate with shrinking federal and state support but are expected to provide better lab facilities, classrooms, residence halls, and athletics programs. The list goes on for demands that genuinely improve the college experience—but they come with a cost.

That said, it is time for reforms that will make our operations more transparent and our institutions more competitive, which should drive a reduction in costs, or at least hold them down.

The White House has suggested that the amount of federal student aid that an institution receives should depend on how well it performs on certain key measures. I wholeheartedly agree with this in concept. The question is what those key measures should be. They should include rates of loan default, retention, and graduation. But not tuition.

Tuition increases, while important to know, are not performance measures. Tuition rates are tied to costs and financing sources. As state support erodes, colleges must be able to set tuition and fees. They pass on costs of new facilities and other enhancements, such as more full-time faculty, to students, fully aware that this affects choice.

And students do have a wide range of institutions to choose from. It is unproductive to lump all institutions in the same bucket in terms of expenses, evaluation criteria, abuses, or remedies. Why compare a community college with a research university? Or private and public institutions with for-profit institutions? The missions and methods are different.

That difference is not always easy for the public to understand, especially when accreditation agencies do not use rigorous standards when reviewing for-profit institutions. President Obama and Congress should encourage accrediting agencies to expand the scope of their inquiries to include questions about graduation, loan-default, and retention rates, and other key measures, as well as to set accountability standards.

Those measures should be tied to the nature and mission of the institution and should press for transparency. If we do not want the federal government to get involved, we need to reform accreditation standards. These agencies, rather than the government, should be publishing report cards.

We also need to reform the student-loan process. Nearly all colleges offer need and merit-based aid for qualifying students, especially those who fall short after exhausting Pell Grants and loans. A one-to-one Pell Grant match, or better, is already common at private institutions. Why not make most colleges have to match Pell Grants according to some formula? Community colleges should be exempt from such a matching requirement, but public institutions raise funds and seek support from their alumni. Those are the easiest dollars to raise and could be used to support students. If institutions were required to match Pell Grants with their own money, federal funds would go further, and institutions would have a vested interest in degree completion.

To ensure that colleges—private, public, and for-profit alike—pay closer attention to student progress, they could adopt the policy of many companies that support their employees' educational goals. Pell and other grant money would be paid after the student has completed courses. Loan money would be used to cover living and other expenses. Right now money is too easily allotted, and abuses are rampant when students have little encouragement and support to complete their courses. The government makes money from student and parent loans, and any politician stating that the government is being shortchanged is being disingenuous.

To help students graduate with reduced levels of debt, federal financial-aid programs should encourage four-year colleges to keep degree programs to a reasonable number of hours, with eligibility limited to six years.

A more ambitious approach to paying for college, addressing both debt and differences in types of higher education as well as allowing for students to complete programs at their own pace, would be a postsecondary credit account, with a fixed-interest payback clause. Each student would be given a maximum amount of federal money to spend as he or she sees fit. The government should conduct a study of the pros and cons of creating such a lifetime "credit account" for postsecondary education. Young people could receive additional credit for volunteer or military service.

Finally, all institutions receiving federal money should be required to publish agreed-upon indicators of institutional quality, including admission criteria, freshman-year completion rates, graduation rates, loan-default rates, and five-year averages for increases in tuition and fees. Each of those indicators should be presented to students and parents by all types of institutions in the same way; however, as noted above, different benchmarks should be required for different sectors of postsecondary education.

These proposals will be controversial in higher education, although business and other leaders will very likely find them reasonable. The problem is that while we are accustomed to federal handouts, state and federal governments have run short on cash and government leaders have become impatient with colleges' inability to offer solutions. They lump us all together—two-years, four-years, private, public, and for-profit—because they do not see us distinguishing ourselves on issues of cost, waste, and access.

It's time for bold new approaches.

The Rev. Michael J. Garanzini is president of Loyola University Chicago.